The situation is still good. The number of unemployed continued to decline in the final months of 2021. But the never-ending corona pandemic is casting its shadow. New variants such as Omikron are slowing down recovery from the crisis. This could happen what has not happened for a long time: More people without a job.
One can still speak of a resounding success. When the German economy suffered its second worst slump since the Second World War in the 2020 pandemic, there were immediately hundreds of thousands more unemployed. Since then, however, things have steadily improved. State-subsidized short-time work prevented mass layoffs. Little by little, more and more people found work – by the end of 2021.
“The labor market developed well towards the end of the year,” says Detlef Scheele, head of the Federal Employment Agency. “Companies are reporting as many vacancies as before the pandemic” – currently there are 800,000. In December, unemployment rose only very slightly. If you factor out seasonal factors, such as the fact that construction sites are closed in winter, there were even fewer unemployed. In December only 2.33 million citizens were looking for a job. That was 400,000 less than a year ago – and little more than before the outbreak of the pandemic.
But now there are clear warning signs that the situation is getting worse. The job barometer used by the Institute for Employment Research (IAB) has been falling for months. In December it shrank as much as it has not since spring 2020 – when the pandemic broke out. There is therefore a threat of a turning point: “Unemployment will probably increase in the next few months,” says agency chief Detlef Scheele.
In the case of the long-term unemployed, we will still have to struggle with the consequences of the crisis for a few years “
“The Omikron variant is dragging out the corona crisis,” analyzes IAB scientist Enzo Weber. The labor market will not collapse even if there is another lockdown. “Lots of companies will keep their people”. For long-term unemployed people who have been out of their jobs for more than a year, however, the prolonged crisis will be critical. “With the long-term unemployed, we will have to struggle with the consequences of the crisis for a few more years,” expects Detlef Scheele.
There are also warning signs when it comes to short-time work. Rising infections are unsettling consumers. Shops, hotels and restaurants in particular are sending more employees on short-time work again. There are signs of layoffs. In addition, there are delivery bottlenecks for important preliminary products such as chips, which are affecting industry and, in the meantime, also the skilled trades.
Agency boss Scheele expects unemployment to rise in January and February. The further development depends heavily on the pandemic. “Omikron will be another tough test for the German economy,” says Fritzi Köhler-Gelb, chief economist at Kfw-Bank. “The prospects for the economy and the labor market are therefore extremely uncertain for the next few months.”
However, Scheele does not expect a widespread lockdown. After a shaky start on the labor market, he expects an improvement at the beginning of the year: “On average for the year, unemployment will not rise”. In line with this, the German economy should grow again this year: Economic researchers are predicting growth of more than three percent.
Scheele counters warnings that a higher minimum wage will cost many jobs. The new federal government wants to increase the minimum wage from currently less than ten to twelve euros. “We do not expect the increase in the minimum wage to have a negative effect on the labor market,” says the agency boss.